Jefferies and Cantor Fitzgerald Cut At Standard & Poor's

Ratings agency Standard & Poor's just placed three brokerage
houses, including Jefferies
Group and Cantor Fitzgerald, on negative outlook.

S&P said it took the action as investment banking and
institutional sales and trading operations continue to face a
soft market environment.

However, the company maintained its BBB ratings on the two
houses.

GFI Group, another brokerage firm, was placed on
CreditWatch negative, which generally precedes a downgrade. If
the company is hit with a ratings action, it would see its debt
cut to junk rating.

"We believe brokers with institutional sales and trading
and investment banking businesses will be challenged by ongoing
weakness in the financial markets — largely because of concerns
about Europe's financial crisis and the impact that it is having
on the European banking systems and economies,"
Primary Credit Analyst Robert Hoban
said.

S&P noted that Jefferies was only modestly exposed to Europe,
but that the risk of contagion could lower underwriting volumes
for all three firms.

Shares in Jefferies are now off some 2.4%, after trading higher
earlier in the day.

Full announcement.

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Negative Rating Actions Taken On Three U.S. Brokers Based
On Expectation Of Continued Weak Industry Conditions

We believe that brokers with institutional sales and trading
and investment banking businesses are likely to face a prolonged
period of low profitability and possibly other financial
pressures because of ongoing weakness in the financial markets.

In our view, the confidence sensitivity of firms such as
Jefferies Group and Cantor Fitzgerald is elevated under these
conditions.

As a result, we are revising our outlooks on Jefferies Group
and Cantor Fitzgerald to negative from stable, and we're placing
our 'BBB-' ratings on GFI Group on CreditWatch negative.

The negative outlooks and CreditWatch negative reflect our
view that these firms' operating performance will remain under
pressure as a result of broader issues affecting the securities
markets.

NEW YORK (Standard & Poor's) Jan. 27, 2012--Standard &
Poor's Ratings Services today said it revised its outlooks on
Jefferies Group Inc. and Cantor Fitzgerald L.P. to negative from
stable and placed its 'BBB-' ratings on GFI Group Inc. on
CreditWatch with negative implications. We also affirmed our
'BBB' counterparty credit ratings on Jefferies and Cantor
Fitzgerald.

The rating actions reflect our view that these companies, and
some other institutional brokers, will likely face continued
pressures and lower profitability as a result of broader issues
affecting the securities markets. We also believe that these
conditions could further increase the already high confidence
sensitivity of leveraged wholesale funded institutions like
Jefferies and Cantor.

We believe brokers with institutional sales and trading and
investment banking businesses will be challenged by ongoing
weakness in the financial markets--largely because of concerns
about Europe's financial crisis and the impact that it is having
on the European banking systems and economies. Although
Jefferies' direct exposure to Europe is modest, in our view, and
Cantor's even more so, the risk of contagion from the region's
debt crisis could lead to a prolonged period of reduced trading
and underwriting activities, heightened risk of a recession in
the U.S., less favorable funding conditions, and possibly some
mark-to-market losses. Based on this view, we already have
negative outlooks on Goldman
Sachs Group (A-/Negative/A-2) and Morgan
Stanley (A-/Negative/A-2), among others.

We continue to believe that Jefferies', Cantor's, and GFI's more
agency-focused business models and comparatively limited
principal market and credit risk exposures bolster their
financial profiles and should reduce the risk of material losses
from eroding asset valuations. In addition, we recognize measures
these firms have taken, including reducing leverage and making
efforts to reduce risk. That said, we consider their exposure to
prolonged weakness in the financial markets and heightened stress
in the financial system material given the firms' business and
financial profiles. For further company-specific information, see
the individual research updates, listed below.